Markets end in the red after initial gains from RBI decision

The Indian market reversed its Tuesday rally and closed Wednesday's session in the negative territory. Although the session began positively and gained momentum after the RBI hinted at potential rate cuts as early as December, this momentum could not be sustained, as heavyweights like Reliance Industries, HDFC Bank, and ITC dragged the indices lower.

The Nifty 50 closed the session with a drop of 0.12%, finishing below the 25,000 mark at 24,981 points. The Sensex wrapped up the day with a 0.21% increase, settling at 81,465 points.

Of the 50 constituents in the Nifty index, 27 closed in the positive territory, with Cipla leading the way, rising by 2.4%. Other notable performers included Trent, Tata Motors, State Bank of India, Maruti Suzuki, Tech Mahindra, Shriram Finance, Bajaj Finance, Bajaj Finserv, and Axis Bank, all of which finished today's session with gains exceeding 1.5%.

As large-cap stocks faced profit booking at higher levels, mid-and small-cap stocks continued to gain ground for the second consecutive trading session. The Nifty Midcap 100 index closed with a gain of 1%, finishing at 59,107 points, while the Nifty Smallcap 100 index rose by 1.33% to end at 18,864 points.

RITES was the top performer in the smallcap index, surging by 8.2%, followed closely by CDSL, which rallied by 8.1%. Other notable gainers included Radico Khaitan, Affle (India), Action Construction, Blue Star, Apar Industries, and Welspun Living, all of which finished the session with gains exceeding 5%.

The overall market capitalisation of the firms listed on the BSE rose to nearly ₹462.2 lakh crore from ₹459.5 lakh crore in the previous session, making investors richer by about ₹2.7 lakh crore in a single session.

RBI shifts stance to 'neutral'

The Reserve Bank maintained the repo rate at 6.5% for the tenth consecutive policy meeting. However, the Monetary Policy Committee (MPC) signalled a shift in its stance from "hawkish" to "neutral," paving the way for potential rate cuts in the future.

This decision comes amid early indications of slowing economic growth. Major central banks globally have embarked on a cycle of easing due to declining inflation, including the US Federal Reserve, which reduced rates last month for the first time in over four years.

The RBI maintained its growth forecast for the current fiscal year at 7.2%, supported by strong consumption and investment trends. However, it has revised the GDP estimate for the second quarter down to 7% from a previous projection of 7.2 %. Real GDP growth for Q1 of 2024-25 was also adjusted to 6.7% compared to the earlier estimate of 7.1%.

The RBI raised its growth forecasts for the third and fourth quarters from 7.3% and 7.2%, respectively, to 7.4%. In its August policy statement, the RBI projected real GDP growth at 7.2% for the fiscal year.

Investors cautious  

Commenting on today's market performance, Prashanth Tapse of Mehta Equities said, "Markets lost ground in the second half and slipped into the red on selective profit-taking as investors resorted to caution in the run-up to the start of the second quarter earnings season. For markets to perform well going ahead, strong conviction is required, and the earnings season will be the key thing to look out for over the next few weeks."

Vinod Nair of Geojit Financial Services said, “An upward revision in the third quarter inflation reiterates that inflation remains a concern for the RBI and led investors to book profit towards the close. The volatility in input prices and the impact on margin dragged the FMCG stocks.”

"The change in RBI's stance to neutral was favourable and expected, but the commentary is not pointing to a rate cut in the near term," he added.

(By arrangement with livemint.com)